Fiscal 2014 Senate Budget Proposal Includes Cap on Tax PreferencesLast week the House and Senate Budget Committees approved their fiscal 2014 budget proposals. The resolutions, which are not binding, set each chamber’s spending guidelines for the coming fiscal year. The House began floor debate on its budget proposal this week, but the Senate is unlikely to engage in floor discussions on its companion budget bill until after the Easter holiday recess.
The Senate budget resolution suggests imposing a cap on tax preferences for higher-income earners to raise additional federal revenue, which could include capping deductions for both tax-exempt and tax credit bonds. The proposal notes that “this could take the form of a limit on the rate at which itemized deductions and certain other tax preferences can reduce one’s tax liability, a limit on the value of tax preferences based on a certain percentage of a taxpayer’s income, or a specific dollar cap on the amount of allowable deductions.” Concerned with the prospect of such provisions being included the resolution, the GFOA, along with the National League of Cities, National Association of Counties, and others, sent a letter to the House and Senate Budget Committees, urging their support for preserving the municipal tax exemption.
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